In Re Piazza
451 B.R. 608
Bankr. S.D. Florida2011Background
- Debtor filed a Chapter 7 petition on October 8, 2010, about a day before a state-court deadline to produce documents on a final judgment.
- Creditor Nueterra Healthcare Physical Therapy, LLC holds a substantial state-court judgment against the Debtor and moves to dismiss on January 18, 2011.
- Debtor amended Schedules I and J on December 31, 2010; omitted a Honda Finance lease debt and post-judgment interest accrued.
- Creditor asserts Debtor’s debt is primarily consumer or that the case should be dismissed for abuse under 707(a) totality of circumstances and 707(b) means test,
- The court analyzed whether the Debtor’s debts are primarily for personal purposes and whether bad faith supports dismissal under 707(a) as well as 707(b).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether §707(b) dismissal is appropriate as debts are primarily consumer | Nueterra argues Debtor is consumer debtor; debt includes Honda lease misstatement | Piazza contends debts are primarily non-consumer | Not applicable; non-consumer debts exceed 50% of total; 707(a) grounds may be pursued |
| Whether bad faith dismissal under §707(a) is warranted | Nueterra cites totality factors showing bad faith | Piazza argues no bad faith based on circumstances | Bad faith shown under totality of circumstances; dismissal for cause granted under 707(a) |
| What factors govern bad-faith determination under 707(a) | Factors reflect debtor’s manipulation of debt and lifestyle | Factors are not dispositive without context | Court adopts multi-factor framework and analyzes factors collectively |
| Whether the disposition should be under §707(a) or §707(b) given debt classifications | Creditor seeks 707(b) based on misclassification | Debtor’s business debt discrepancy still results in 707(a) relief | Found 707(b) inapplicable; 707(a) grounds exist based on bad faith |
| What is the final remedy and period of dismissal | Dismiss case to prevent abuse | Case should not be dismissed if honest debtor can reorganize | Dismissal with prejudice for 180 days |
Key Cases Cited
- In re Kane & Kane, 406 B.R. 163 (Bankr. S.D. Fla. 2009) (bad faith can support dismissal under 707(a))
- In re Boca Village Ass'n, 422 B.R. 318 (Bankr. S.D. Fla. 2009) (totality of circumstances approach to bad faith under 707(a))
- In re Tallman, 397 B.R. 451 (Bankr. N.D. Ind. 2008) (multifactors used to assess bad faith (early view))
- In re Huckfeldt, 39 F.3d 829 (8th Cir. 1994) (bad faith dismissal; limits on using bankruptcy as shield)
- In re O'Brien, 328 B.R. 669 (Bankr. W.D.N.Y. 2005) (uses totality of circumstances in bad-faith analysis)